Predetermined overhead rates are used in first-stage cost allocations but not in second-stage cost allocations.

First stage and second stage cost allocation methods

Cost pools are used in the first stage as well; predetermined overhead rates are used in both stages.

Plant wide and department wide allocation methods

Direct cost allocations are required for the plant wide and department allocation methods
Costs are a function of activities rather than volume and allocations are of indirect costs rather than direct costs.

The number of services provided by an accounting firm would be classified as a...

Product-related activity.

(The services provided are the product.)

ABC costing shows that Volume-based costing ___________ the cost of high volume products and ______________ the cost of low volume products.

OverstatesUnderstates

(High volume products have too much allocated because they have more of the volume activity. The opposite is true for low volume.)

Which of the following would be a reasonable basis for assigning the materials handling costs to the units produced in an activity-based costing (ABC) system?

Number of components per completed unit.

(Material handling would logically be related to the amount of material in a product.)

Death Spiral

A vicious cycle of attempting to cover a fixed amount of costs with fewer and fewer units until, at the extreme, the firm is producing no units.

Batch-related cost driver

For this cost driver, it does not matter how many units are produced as one purchase order is prepared for many items.

Product-related cost driver

For this cost driver, a cost is incurred by having the entire product available for sale

(advertising and design costs)

Activity-based costing

A two stage product costing method that assigns costs first to activities and then to the products or services based on each product or service's use of activites.

The cost pool for determining the indirect cost allocation is the entire plant